Ken Reser; Jan. 31/06
Molybdenum (Mo) may be silver in luster and color, plus leave graphite like grey residue on your fingers when rubbed, but it certainly puts the green in many company bank accounts and is one of, if not 'the' most important components in helping keep our environment green when it comes to de-sulfurizing carbon based fossil fuels.
As I have expounded upon in my two previous editorials regarding Molybdenum, it is THE KEY component in all catalysts used in removing sulfur from Crude Oil, Natural Gas and Coal. (links to previous Moly editorials at page bottom) The many other mainstay uses of Moly are already well known, such as the anti corrosive, heat resistant and strength qualities used in the Steel industry, as well as its lubricant capabilities and far too many other uses to list here but still, little attention is given over to the booming Catalyst market in our ever increasing world energy demands.
This seemingly innoculous noble metal with little to no media fanfare generated US $11.2 Billion in worldwide revenue for producers in 2005. Not only was it a boon for Moly miners but also for the multitude of widespread varieties of Moly Powders and Catalyst producers and traders thereof. One reason we have heard so little spoken about Moly in the past is the fact that there is no futures trade in this metal and hence no reason for the analysts to follow the trading and make their ever so questionable forecasts. So whom you may ask does care about Moly and the revenue it generates? Well offhand I can think of a couple of world class mining giants who do and whose fortunes have been made in part or primarily by the mining of Molybdenum. Whether as a primary or as a secondary by product mineral, Moly has been a very large part of the success of companies such as Phelps Dodge, Climax Molybdenum and Teck Cominco to name only the larger ones. Others such as the Endako Mine, owned by the private group Thompson Creek 75% and Japan's Sojitz Corp 25% have done extremely well with just primary Moly production. Endako for over 38 years has produced one of the cleanest, purest Moly concentrates mined in NA, and as such was even able to produce and market its own lubricant grade Moly powder. It also appears at the present time that a small, much overlooked junior company, Adanac Moly Corp (AUA-V) will soon be following the path of Endako with almost identical grades and quality of Moly at their Atlin BC, Ruby Creek project which is now near completion of the bankable Final Feasibility. Applications for mine permits are being submitted for construction and production.
Occasionally I hear it said by those who wish to keep our focus on various Copper plays that have Moly by product, that a primary Moly mine cannot have merit as it takes Copper to make the Molybdenum profitable. Simply put, this is a nonsensical rationale put forth by those who either have little understanding of Molybdenum and mining or just an agenda they wish to further. I must say however in all fairness that if the grade of Mo is sufficiently low then yes, the mine would need the Copper profits to be feasible. For the record and "in the BC Mines records", the Endako Mine has produced over 432,000,000 lbs of Moly concentrate from 309,000,000 T's of ore milled over their 38 years in operation. This 'Primary Molybdenum' mine didn't need Copper, nor did they want any. Copper particulants in Moly concentrate are a contaminant that must be removed prior to producing any form of high grade Moly powders as are any other metals particles that are present. Without the contaminants present Endako has possibly one of the lowest roasting costs and finest grades of any Moly mine in NA. Even with an approximate expected mine life expectancy of only 4 more years, Endako was still able to produce just over 10 M lbs of Moly in 2004.
The junior company I mentioned earlier "Adanac Moly Corp" already has "Proven" reserves of 278 M lbs and a lifespan of over 20 yrs outlined in the preliminary feasibility, with potential for greater reserves and mine life thru further extension and drilling at depth. Adanac's Ruby Creek is estimated in the Preliminary Feasibility to be able to produce more than 10 M lbs Mo /yr at a milling rate of 20,000 T /d. All the data and information in relation to this company's claims and progress have been accrued thru the expenditure of over $7 M dollars w/ much of this for work by several of the world's top mining consulting firms such as Klohn Crippen, MinovEX Technologies, Golder & Associates as well as Wardrop Engineering. These studies have been filed with the BC Securities Commission, and posted in a very transparent manner at the company website for all to read. www.adanacmoly.com This is a credibility factor that is going largely unnoticed by many investors and it should be noted that these reports and studies are done at arm's length from Adanac itself and kept up to date on the company website for all stakeholders to view. One very financially salient point also for Ruby Creek is that it is an open pit operation with a very low 0.5 to 1.0 stripping ratio and not an underground mine with all of the higher costs associated with a mineshaft operation.
In my twenty odd years of involvement with the mining industry I've never been given over to making many predictions on metals prices other than to jump immediately onto the GATA bandwagon in 1999, as a goldminer myself, I have long held certain beliefs when it came to Gold & Silver markets and the future prices of both metals. Now we are seeing my expectations/predictions with both come to pass. I firmly believe that today we are seeing a completely different scenario in base metals than in past decades and in particular with Molybdenum as well as 2-3 other base metals. I will state for the record that I do not personally believe we will see Moly below the $12. to $15. mark again for many years if ever. In fact I fully expect the price soon over the next few months rise back to the highs of 2005. The demands are so great around the world at present and will be far greater still in future. There may be many millions of pounds of Moly "in the ground" as some analysts/writers like to harp on, but it takes many years to prove them up, permit and bring the product above ground. Adanac Moly is probably the closest, time wise, to a large scale, (20,000 T/day) low cost production "Primary Moly" company I know of with a new mine on the horizon. One should keep in mind that in all probability many of the 'known' Molybdenum deposits will never see permits for mining and Moly from them will never see the light of day.
Another important aspect of the Moly market to bear in mind is that the Copper/Moly by product producers have ramped up high grade production twice in the last 18 months. These mines did so first to capitalize on the Moly price boom and secondly when Copper started its wild run. Now those same miners will see lower grades being mined in 2006/07 as they must pull back benches in the open pits, strip at surface and mill a whole lot of lower grade ore to maintain pit design, integrity and stability. You cannot just mine the high grade portion of an open pit operation indefinitely, that's why a pit design can cost as much as a million dollars or more and has a distinct function with regards to safety, fault zones and stripping costs.
When I write that I expect huge demand going forward on Molybdenum in the catalyst sector of energy, I am not alone in this presumption. We have already covered Molybdenum's various new and current demands escalating worldwide in the Steel alloys sector in previous Moly articles and the direct correlation to China and India among other nations experiencing explosive construction booms as well as touched upon Catalyst demand. What is being analyzed more of late is the aforementioned Catalyst demand of which as I have previously stated Molybdenum is the key component used in combinations with other metals such as Nickel, Iron, & Cobalt etc.
In an excerpt from this following Catalyst Study Report by BCC Research.com, they also have a distinct and educated opinion as to what we may expect in the Catalyst sector going forward.
- The global market for energy and environmental catalysts was worth an estimated $6.4 billion in 2003. The market is projected to grow to nearly $13.0 billion in 2009, an average annual growth rate (AAGR) of 12.8%.
- Refinery catalysts, now 90% of the energy catalyst market, are projected to lose market share from 2004 through 2009 as other energy applications, particularly synfuels and biofuels, consume increasing amounts of catalysts.
- Mobile source air pollution remediation applications, particularly vehicle catalytic converters, accounted for over 36% of the environmental catalyst market in 2003, followed by stationary source air pollution applications (e.g., power plant emissions controls) with 33% of the market.
- Stationary source applications are projected to grow rapidly due to new environmental legislation, so that by 2009 they will have a projected 65% share of the environmental catalyst market.
Global Energy and Environmental Catalyst Market,
Source: BCC, Inc.
Meeting rising energy requirements and protecting the environment are among the most important applications of catalyst technology. Broadly speaking, a catalyst is a substance that increases the rate of a chemical reaction by reducing the required activation energy, but is left unchanged by the reaction.
The petroleum industry is the largest single user of catalysts, especially in producing refined products such as gasoline and diesel fuel. Catalysts also contribute to increasing the supply of petroleum, by making it commercially possible to produce oil from sources once regarded as uneconomical such as tar sands and heavy oil deposits. Catalysts are also being used to produce increasing quantities of synthetic oil and gas from coal and oil shale. Also, catalysts are in the forefront of technologies being developed to replace conventional fossil fuels.
Catalysts are indispensable to many types of environmental remediation, from vehicle emissions control systems to industrial effluent and municipal waste treatment. Catalysts also contribute indirectly to reducing pollution and other adverse environmental impacts, e.g., through cleaner-burning fuels and the production of products such as refrigerants that pollute less than the substances they replace.
This BCC report provides an understanding of how catalysts contribute to meeting the energy needs of the U.S. and world economies while helping to prevent environmental degradation and remediating adverse environmental impacts as they occur and provides complete market coverage.
SCOPE OF STUDY
The report covers catalyst use in:
- Production of crude oil and gas from non-conventional sources such as tar sands and heavy oil reservoirs
- Synfuels production (e.g., coal liquefaction/gasification, shale oil)
- Oil recycling
- Alternative fuels production (e.g., hydrogen)
- Other emerging energy technologies such as fuel cells and photovoltaic cells
- Increasing fuel efficiency (e.g., fuel additives that increase burn efficiency)
- Avoiding or reducing environmental damage
- Mitigating or remediating adverse environmental impacts after they occur.
The entire BCC report can be purchased here @ their website; www.bccresearch.com/environ/C166R.html for a cost of $3850.00.
Personally I am content and satisfied with what I know already from many months of research and discussions with major industry participants, w/o having to pay this costly sum.
The more research I do with regards to Molybdenum and the Catalyst market or the Steel Alloys construction sector, combined with the demands from all aspects of worldwide Oil & Gas exploration, drill stem tubing use, tens of thousands of kilometers of new pipeline production and new refineries coming under construction and then add in Coal Liquefaction plants & Tar Sands et al, I come away with the distinct realization that Molybdenum the metal, and those who would mine it are flying under the radar screens of so many investors that it is almost inconceivable. For a far more complete picture on the wide variety of other uses of Moly I would highly suggest reviewing my two previous reports with respect to Molybdenum. Can you say it, or even spell it? I could not do either one 2 years ago, but I can now and in time so will many others who paid attention with extensive due diligence and were ahead of the curve on whom to follow among the growing numbers of potential junior Moly projects, especially upon finding one with a multi Billion dollar Moly deposit at such an advanced stage as Adanac Moly Corp's Ruby Creek deposit, not to mention the three wholly owned Nevada Molybdenum properties with inferred economic grade reserves of over 467 Million lbs of Mo to be added to the previously mentioned Ruby Creek reserves.
As I have stated that although AUA-V share value in my personal estimation is greatly undervalued at this point in time, the project itself is not so in the least.
(current Ruby Creek orebody value w/ Mo @ $25.50 lb = +$7 Billion U.S.)
The data submitted thus far by the highly regarded mining industry consultants who have worked on this project since its inception has made this patently clear. It is only a question of time until the market awakens to this fact and sees the total transparency and viability of the Ruby Creek Atlin project outlined for all to review. That time draws very near as we await the Bankable Final Feasibility study summation, and submission of detailed information for permits in the month of February /06.
Further Commentary from the International Molybdenum PLC Website on Moly
demand and production going forward; (Study By CRU Global Research)
Global demand for molybdenum rose by 7.2% in 2004 to 374 million lb from 349 million lb in 2003. Western Europe was by far the largest consuming region, followed by the USA and Japan. China is a significant consumer of molybdenum and its consumption has been growing rapidly especially in low alloy steels. A study prepared by CRU, commissioned by the Company, projects continued growth in molybdenum demand to 2009 of between 3.5% and 4.1% p.a. based on conservative and upside macroeconomic growth assumptions respectively. Using these growth rates, world demand for molybdenum in 2009 is projected to reach 443 to 475 million lb.
Production of molybdenum in concentrates was 374 million lb in 2004. Of this, 162 million lb or 43% of production came from primary molybdenum producers. The remaining 212 million lb came from copper mines which produce molybdenum as a by-product. By-product molybdenum production is, however, mainly determined by mining plans for copper. The major primary molybdenum producers are located in the USA (e.g. Phelps Dodge's Henderson Mine), Canada (e.g. Endako) and China (a large number of mainly small mines). The major by-product producers are located in Chile (e.g. Codelco's copper mines), the USA (e.g. Sierrita, Bingham Canyon) and Mexico (e.g. La Caridad). CRU project that production of molybdenum in all forms should reach 438 million lb in 2009.
The chart shows historic world molybdenum supply and demand for the period 2000 to 2004 together with projections prepared by CRU for 2005 to 2009 based on base and upside scenarios.
The industry has been slow to respond to current growth in molybdenum demand and low inventory levels with the consequent rise in prices. Several new molybdenum projects, both primary and byproduct, have been promoted in recent months. However, given the need for financing, environmental approvals and long lead times, it is uncertain whether any of these projects will be in production before 2009.
CRU maintain that supply will be mainly constrained by the lead time of building new primary molybdenum mines and that higher demand for copper is not expected to increase the supply of byproduct molybdenum. Notwithstanding growth in supply of molybdenum in the short term, CRU project a molybdenum deficit of between 6 and 26 million lb molybdenum by 2009 on base case and upside case scenarios. In either scenario the market is expected to tighten significantly and will be short of material in the absence of new primary molybdenum capacity. (END)
In closing I hope all who look to invest in any potential Molybdenum Mine project
would review long and hard as to all the various company's data before deciding which horse to saddle up and ride. It could be quite a rodeo before the dust settles.
As always, thanks for reading; Regards; Ken Reser
Adanac Moly Corp: www.adanacmoly.com
Ticker Symbol: TSX.V: AUA PinkSheets: ANCGF Frankfurter: A9N
Previous Molybdenum Editorials:
Fundamental Research Analyst Report on AUA-V:
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Disclaimer: As a paid Consultant for Corporate Development and Public Relations to Adanac Moly Corp. I may at times own shares or hold Options in this company. As I am not an accredited financial advisor, this editorial cannot be construed as advice to buy or sell shares in this or any other public company. (KR)
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